Small Business and Proposed Bush Policies

Small Business and Proposed Bush Policies

by Janel C. Atlas, December 2009

According to the Small Business Administration, there are approximately 23.7 million small businesses in America. So, there must be at least that many small business owners. And in a close election year like this one, the margin of difference at the polls may be as small as a few hundred thousand.

As the countdown continues to November 2nd, the candidates are reaching out to undecided voters. In town-hall style meetings along the campaign-trail, President George W. Bush paces the platform with his suit coat discarded and his white shirt sleeves rolled. He addresses the audience, trying to connect with small business owners and their employees. He speaks in generalities and sweeping assertions. He assures the crowd that John Kerry will wreak havoc on the American economy. Bush asserts that his plan for small businesses will grow the economy, help small business owners afford health care for their employees, and ultimately create American jobs. But what does President Bush's plan actually propose? And how would his plan affect small businesses?

Small businesses are the engine of American prosperity...

"Small businesses are the engine of American prosperity. Their ingenuity and daring create the jobs of tomorrow - they create seven out of ten new jobs and account for more than half of the output of the American economy," proclaims the Bush/Cheney campaign. Bush often reminds his audiences that he started as a small businessman, though his income and the intervening years suggest much has changed since those days. He always credits his experience as a small business owner for his understanding of and appreciation for the unique economic situation of small businesses.

Reduce Cost of Health Care

Bush promises to promote health plans in which small businesses can unite for better insurance packages for their employees. In addition, Bush proposes health savings accounts which would enable small business employees to put money away—tax-free—to pay for health care.

In the past months, Bush has frequently referred to frivolous lawsuits as a major factor in the health care crisis many small businesses face. His camp has implied that his challenger does not support fighting junk lawsuits, even though that is part of Kerry's plan. Central to Bush's plan for small businesses is a measure that would permit more class action and mass tort lawsuits to receive hearings in federal courts. Bush sees these reforms as ending junk lawsuits. That way small business owners can spend less time and money protecting themselves against potential lawsuits and more time creating jobs.

Continued Tax Relief

During his first term, Bush reduced taxes for about 25 million small businesses. Because about 90% of small businesses pay taxes through the individual tax system, many received tax cuts with Bush's individual tax cuts of the last four years. Similarly, the President's Jobs and Growth package raised the amount that small businesses can report for new capital investments from $25,000 to $100,000.

Bush also temporarily repealed the death tax, a tax charged to heirs who receive a company from the deceased owner. The death tax can charge the heir up to 55% of the total value. Frequently, heirs have to either take out loans to pay the tax or sell the company. This tax practice, Bush argues, is the antithesis of the American Dream. If reelected, President Bush plans to permanently repeal the death tax, which would be a boon to small businesses, which are often passed from one generation to the next.

Increasing Available Government-Backed Loans

Bush's plan touts the sharp increase in the Small Business Administration (SBA) loan-backing. According to the SBA website, this government agency guaranteed 74,000 general business loans worth $14.4 billion in 2002. Under this loan agreement, the borrowing business applies to a commercial lender. Lenders that are concerned about a weakness in the small business appeal to the SBA for a loan guaranty. The SBA assures the commercial lender of reimbursement in case of financial loss. The White House website announces that "between 2001 and 2003, the Bush Administration has increased the number of loans to small businesses by more than 50%, a 50-year record. This record level has already been surpassed in 2004."

Simplification of Regulations

The final major component of President Bush's plan is the simplification of federal regulations. Last year, small businesses received a higher percentage of federal contracts than ever before, due largely to Bush's strategy to reverse the trend toward the bundling of contracts. Instead of federal contracts precluding smaller businesses from bidding, the contracts are broken down into more manageable components which enable smaller, regional companies to bid. Along those lines, the Business Matchmaking Initiative, started in 2003, gives small businesses an equal chance to bid on federal contracts by connecting businesses directly with federal, state, and local government agencies and large companies around the U.S. to discuss the business contracts.

Small businesses represent 99.7% of all employers, and employ half of all private sector workers. That's not a small demographic in an election year. So when Bush is pacing the stage, connecting with his audience, his message for small businesses matters. His record may sway undecided voters concerned with small businesses.